Landlords are struggling to keep up with their mortgage payments in Kenya. This follows an oversupply of highly priced apartments and rising vacancy rates especially in the capital, Nairobi, which has weighed down on the mortgage industry.

When Joseph Mutua, an employee of a government agency, received an offer from his employer to buy a home three years ago, he could  not resist the invitation despite owning another home on Nairobi’s outskirts, where he lives.

“I shopped around for a house in suburbs that neighbour Nairobi. Got one, a three-bedroom bungalow at 65,000 U.S. dollars, which I bought,” he narrated to Xinhua.

His strategy was to acquire the property through the mortgage and make some rental income of it since he already had another home. The property was located in Kitengela, an area to the South of Nairobi and true to its location, things went South for Joseph shortly thereafter.

Mutua, is now grappling with the reality that he may not complete repaying the loan, as tenants have become a scarce commodity.

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“In the about three years I have owned the house, it has been occupied for only 11 months. This year someone stayed in for only two months and is now vacant,” he said

“At least three blocks of five-story apartments have been constructed in the neighbourhood. And they are charging 220 dollars for a three-bedroom flat a month. Myself I charge 250 dollars, which I still consider low considering the size of my house,” he noted.

Joseph’s story mirror’s the plight of several other Kenyans who acquired rental properties in suburbs around Nairobi on mortgage whose strategies were invalidated by the market.

The situation is captured by the central Bank of Kenya’s Annual Bank Supervision Report for 2017.  In the report, real estate accounted for the third highest number of gross non-performing loans, at 14.28% of the total value. The outstanding value of non-performing mortgages in Kenya increased from US$220 million in December 2016 to US$273 million in December 2017.

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The report also noted that despite the rate cap, the number of mortgages had increased since 2016 by about 8.8 per cent to 26,187 in December 2017.

According to the global property guide, ‘Kenya saw a steep rise in property prices between 2010 and 2012, with price growth exceeding 30% annually. Nairobi’s prime residential market has had a price correction recently, an indicator of maturity in the Kenyan real estate market with vendors adjusting their price expectations.’